NightBlogger

Steven Pearlstein
Washington Post
It was only a decade ago, after the heads of some of Wall Street’s biggest banks and investment houses were invited to a meeting at the Federal Reserve Bank of New York and merely encouraged to mount a private rescue for a failing hedge fund, that there were howls of protest from both the left and the right about undue interference. Although no public money was involved, nor any exercise of regulatory powers, the Fed’s behind-the-scenes effort to prevent the collapse of Long-Term Capital Management was seen as an abandonment of free-market principles. Today, those objections seem almost quaint. In March, the Fed agreed to lend J.P. Morgan Chase $29 billion to finance the purchase of Bear Stearns at a price and on terms effectively dictated by the secretary of the Treasury. And to forestall the risk of other failures, the Fed for the first time opened its lending window to investment banks that were not normally subject to its regulatory oversight.

Then, last weekend, the government used its broad regulatory powers to force Fannie Mae and Freddie Mac to accept a federal takeover that could potentially require taxpayers to lend or invest hundreds of billions of dollars to prop up not only the two housing giants but also the depressed market for mortgage-backed securities. Now, officials from the Fed and the Treasury are carefully orchestrating the breakup and sale of Lehman Brothers to rivals and investors. Although it is unclear whether any government money or guarantees will be involved, there is a chance that a part of the venerable Wall Street firm will wind up in the hands of a foreign bank. More

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous. With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. More

Danny Schechter
Instead of having a light at the end of the tunnel, we have another train. Brace yourselves for a wreck.

On Friday, July 11, as the world financial markets were quaking because of the threats to two government-linked companies with $5 trillion in mortgages, as the Senate rushed to complete a bailout bill for homeowners that may not bail anyone out, and as the Federal Reserve Bank announced tough new and perhaps irrelevant regulations on a subprime real estate market that has all but disappeared, news outlets were reporting the death of the owner of the Benihana restaurant chain and Larry King was doing another show about UFOs. With a distraction machine working overtime, we seem to be living in a permanent three-ring circus, with a constantly titillating sideshow often sucking up most of the airtime and attention. Britney Spears has replaced the bearded lady from days gone by as the iconic draw. In the central ring of this circus is the political campaign, with its focus only on the evolving Obama/McCain slugfest. Every sound bite, grimace, phrase and gasp is grist for endless punditizing with little in-depth analysis of the issues. More